One of the key issues facing our company and industry is global climate change. With growing public concern, lawmakers at the federal level are exploring a wide range of potential responses, and it appears that some form of climate change legislation, with mandated reductions in CO2 emissions, is inevitable.

At FirstEnergy, we’ve taken aggressive steps over the past two decades that have increased our generating capacity without adding to overall CO2 emissions. For example, since 1990, we’ve reconfigured our fleet by retiring nearly 1,400 megawatts of older, coal-based generation and adding about 900 megawatts of non-emitting nuclear capacity.

Through these and other actions, we’ve increased our generating capacity by nearly 15 percent over the same period while avoiding some 150 million tons of CO2 emissions. Today, nearly 40 percent of our electricity is generated by non-emitting sources – a key advantage that we expect will help us meet the challenge of future climate change legislation.

Moreover, we’ve taken a leadership role in pursuing new ventures and testing and developing new technologies that show promise in achieving additional reductions in our overall CO2 output. These include:

• Investments in about 215 MW of wind power contracts and increasing the output at our nuclear facilities by about 150 MW, creating more power with no increase in emissions.
   
• Hosting a geologic field demonstration at our R.E. Burger Plant, in collaboration with the Midwest Regional Carbon Sequestration Partnership – one of several regional partnerships established by the DOE – to test the viability of sequestering CO2 underground, in deep geologic formations.
   
• Investing in technologies to maximize the efficiency of our coal-based plants, ensuring we get the most kilowatt-hours (kWh) possible from the fuel we use.
   
• Supporting afforestation – growing forests on non-forested land – and other efforts designed to remove CO2 from the environment.
   
• Supporting research into Plug-in Hybrid Electric Vehicles (PHEVs) by EPRI which show great promise for improving air quality and reducing both greenhouse gas emissions and our dependence on foreign oil.
   

• Participating in a collaborative effort to evaluate the relationship between reducing fertilizer usage in agricultural crop production and reduction in nitrous oxide (N2O) emissions. This study is intended to demonstrate that reduced agricultural tilling will lower emissions while creating no discernible decrease in crop yields, laying the groundwork for agricultural N2O reductions to be used as greenhouse gas offsets in future cap and trade or other regulatory programs.

Despite our progress in these and other areas, we believe the issue of global climate change demands a global response. Future electricity prices could increase significantly as the nation’s utilities install costly new technologies and add non-emitting generation to reduce CO2 emissions. In addition, these new technologies can take significant time and resources to develop. If our global competitors do not face similar mandates and related costs, U.S. companies – and especially our region’s manufacturers – could be placed at an economic disadvantage without achieving any meaningful reduction in global CO2 emissions.

Producing Electricity in an Environmentally Sound Manner

FirstEnergy companies have spent more than $5 billion on environmental protection efforts since the Clean Air Act became law in 1970, and these investments are making a difference. Since 1990, FirstEnergy has reduced emissions of nitrogen oxides (NOx) by more than 65 percent, sulfur dioxide (SO2) by more than 55 percent and mercury by about 45 percent. Also, our CO2 emission rate, in pounds of CO2 per kWh, has dropped by 10 percent through this period.

And, we're committed to doing more. We are investing approximately $1.7 billion at our W.H. Sammis Plant in Stratton, Ohio, to further reduce emissions of SO2 and NOx. This multi-year environmental retrofit project, which began in 2006 and is expected to be completed in 2010, is designed to reduce the plant’s SO2 emissions by 95 percent and NOx by at least 64 percent. This is one of the largest environmental retrofit projects in the nation.

We also are participating in the U.S. EPA’s SF6 (sulfur hexafluoride) Emissions Reduction Partnership for Electric Power Systems. FirstEnergy has voluntarily agreed to reduce emissions of SF6 by five percent per year. Since 1998, the company has reduced emissions of SF6 by 18.8 tons, resulting in an equivalent reduction of more than 450,000 tons of CO2.

We also are one of 19 utility company participants in the Coal Fleet For Tomorrow initiative, sponsored by the Electric Power Research Institute (EPRI).  Designed to accelerate the deployment of clean, efficient, advanced coal technology, the Coal Fleet initiative will assist in the development of future CO2 emissions management strategies. The program will focus on development of integrated gas combined cycle (IGCC) technology and other advanced coal technologies such as ultra-supercritical, pulverized coal and supercritical circulating fluidized bed combustion, as well as the potential for capturing, sequestering, and beneficially reusing CO2.

Since 1995, as part of the Climate Challenge Program, the company has helped sponsor a variety (currently nine projects) of forestry management projects nationwide through the Edison Electric Institute's UtiliTree Carbon Company partnership. This program is designed to reduce greenhouse gases, particularly CO2.

This Edison Electric Institute-sponsored voluntary climate partnership between the U. S. Department of Energy and the power sector helps identify and study the potential of various strategies for reducing greenhouse gas emissions. We're participating in three Power Partners Programs:

• Combustion Products Project (C2P2) - Providing $5,000 in startup funding to develop this joint effort with the U. S. Environmental Protection Agency to increase the beneficial use of coal combustion products by marketing to end-users and working to reduce or eliminate barriers to increased coal combustion product use.
  
• Abandoned Mine Land Restoration - Providing $5,000 in startup funding to develop efforts to reforest, reduce acid mine drainage, improve water quality, and develop wildlife habitats at abandoned mine land sites.
  
• ForestTree - Providing $100,000 of funding for tree planting and lowland reclamation in the lower Mississippi River basin.

Distributed Energy Resource Projects
Distributed energy resources include fuel cells, microturbines, solar and wind systems or energy storage technologies located close to the customer to provide alternatives or enhancements to the traditional electric power system. FirstEnergy has supported research in this area through EPRI and conducted several demonstration projects. For example, with the support of the Ohio Department of Development, we installed a microturbine at a school in northeast Ohio to evaluate opportunities for improving overall energy efficiency.

Through a partnership with EPRI, Case Western Reserve University, the Cuyahoga Valley National Park and the Department of Defense, two solid-oxide fuel cells were installed as part of a test program to explore the technology and the environmental benefits of distributed generation. We’re also collaborating with the University of Akron to develop educational materials for use in understanding the technology and its capabilities. These materials will be available at the Environmental Education Center in the park, where the test site is located.

In cooperation with EPRI, we’re evaluating the impact of energy storage on the distribution system through analysis and field demonstrations of advanced battery technologies. In one project, we are testing a 100-kW, grid-interactive energy storage system at a New Jersey distribution facility.

Research and Development
FirstEnergy Technologies is working with customers to identify cost-effective applications for low-emitting electro-technologies, such as the microturbines and other distributed generation. Currently, we are analyzing data on equipment in use at the Canton City Schools and at our facilities on Ghent Road and in Stow.

(07/08/08)